Is this the Insurance Casualty Model; Or Just a Dirty Trick?

The health insurance “Casualty Model” is alive and well in Georgia — but only as a punishment for not signing an in-network agreement or accepting usual and customary reimbursement for emergency room treatments. At issue is a Georgia hospital (and one in Los Angeles) that are not part of the Blue Cross and Blue Shield of Georgia network. Because neither of the hospitals are part of the insurer’s network, when covered individuals go to the hospitals’ emergency rooms, the insurer sends reimbursement checks for emergency care directly to enrollees. The enrollees are then supposed to endorse the checks over to the hospital. This is similar to the casualty model when an insurer provides funds for a covered claim and the covered individual shops around and receives a service at the provider of their choice. When someone slid into my car during an ice storm a few years ago, an adjuster came to my office and calculated an estimate. I received the check and was told I could get my car repaired almost anywhere for the estimated amount.

In the case of the Georgia health insurer, the insurer maintains the stance that out-of-network care is a private matter between hospital and patient. In this case, however, there was no shopping and often no payment. The patients tended to cash the (rather large) checks and many didn’t turn over funds to the hospital. One enrollee is accused of visiting the emergency room 11 times over a five month period amassing $70,000 in charges that were paid to the enrollee, but never turned over to the Los Angeles-based hospital.

Two hospitals, Polk Medical Center in northwest Georgia and Martin Luther King, Jr. Community Hospital in Los Angeles, are suing Blue Cross and Blue Shield of Georgia. The Atlanta hospital, Grady Memorial, also reports treating some patients covered by Blue Cross and Blue Shield of Georgia, who received payments directly from the insurer rather than payment being sent to the Atlanta-based hospital.

Some hospitals refuse to join an insurer’s network believing they can command higher fees from patients who use them anyway. This is especially true of emergency rooms, where patients would presumably exercise less discretion over where they seek care. Blue Cross and Blue Shield of Georgia is accused of using the strategy to strong-arm hospitals into joining its network. In-network fees tend to be lower than the out-of-network charges. When asked about the strategy, one expert explained that a hospital that aggressively attempts to collect may alienate their patients, discouraging future visits. This may be an effective strategy to incentivize hospitals to negotiate an agreement and join a network rather than risk collecting from patients. However, one very significant risk for the insurer is that some unscrupulous enrollees will game the system and seek unnecessary emergency care to gain access to the funds.